CBI boss calls for Rachel Reeves to break Labour’s tax pledge
The boss of the Confederation of British Industry (CBI) has suggested the chancellor should tear up Labour’s manifesto pledge not to raise taxes on working people, as businesses brace themselves ahead of the Autumn Budget.
Rachel Reeves is widely expected to introduce a fresh package of tax hikes in her 26 November Budget, in order to offset deteriorating economic forecasts.
However, the Chancellor’s hands are tied by Labour’s promise not to increase income tax, national insurance, and VAT, which are the three main revenue raisers for the Treasury.
In a shocking move, the CBI’s chief executive, Rain Newton-Smith, has said “the time for tinkering is over” in the discussion of how to raise additional revenue.
Writing in the Guardian, Newton-Smith warned the chancellor against “slavish adherence” to tax promises made in the run up to the 2024 general election, as the government faces increasingly pressing economic problems.
She wrote: “The fact is is that geopolitical and global markets have shifted.”
“The world is different from when Labour drafted its manifesto, and when the facts change so should the solutions. The chancellor cannot raid corporate coffers again, so she must look elsewhere.”
Reform business rates
Newton-Smith also called for the reform of business rates, VAT thresholds for small firms and stamp duty.
Reeves used her maiden budget last year to announce a £40bn package of tax increases, including a widely criticised £25bn increase in national insurance contributions.
The decision has been widely blamed for helping fuel inflation, and the chancellor subsequently promised not to return with further tax hikes.
However, the independent Office for Budget Responsibility (OBR) is widely expected to downgrade its growth forecasts following a review of its optimistic-looking productivity expectations.
The shift could leave the Treasury searching for £20bn in revenue in five years’ time to put Reeves on course to meet her fiscal rules.
Manifesto constraints
Reeves had repeatedly emphasised her intention to stick to the pledges in recent weeks as speculation about potential tax rises continues to grow.
Ruth Curtice, chief executive of the Resolution Foundation, agreed that locating £20bn within the constraints of the manifesto would be problematic.
She said to the Guardian: “Raising that amount without touching taxes that account for three-quarters of the UK’s tax base risks…loading excessive pain on to small groups and harming economic growth.”
A Treasury spokesperson said: “We are protecting payslips for working people by keeping our promise to not raise the basic, higher or additional rates of income tax, employee national insurance, or VAT.”